Taiwan Barley Products Industry Association and 3 of Its Association Members

1363rd Commissioners' Meeting (2017)

Case:

Taiwan Barley Products Industry Association filing an application behalf of Formosa Oilseed Processing Co. Ltd. and two other companies for extension of joint barley purchase and shipment

Keyword(s):

Barley, approval for concerted action

Reference:

Fair Trade Commission Decision of December 20, 2017 (the 1363rd Commissioners' Meeting), Letter Kung Lian Tzu No. 106003

Industry:

Manufacture of Prepared Animal Feeds (0870)

Relevant Law(s):

Articles 15 and 16 of the Fair Trade Law

Summary:

1. On behalf of Formosa Oilseed Processing Co., Ltd., Fwusow Industry Co., Ltd. and Uni-president Enterprises Corporation, the Taiwan Barley Products Industry Association (hereinafter referred to as TBPIA) filed an application for an extension of the permission for joint procurement and shipment of barley imports.
2. Application items:
   (1) Extension of permission for joint procurement and shipment of barley imports.
   (2)Periods of joint shipment: Jan. 1, 2018 to Dec. 31, 2022, five years in total.
3. Contents of permission
   (1) The original joint procurement and shipment permission held by the applicants expired on Dec. 31, 2017 and the extension applied for this time complied with Subparagraph 5 of the proviso set forth in Paragraph 1 of Article 15 and Paragraph 2 of Article 16 of the Fair Trade Law. Therefore, the applicants requested for the permission are to be extended until Dec. 31, 2022.
   (2)Each quarter, the applicants would file with the FTC a written report on the implementations of joint procurement and shipment, including the registered quantity to be purchased by each importer on each ship, the actual quantity purchased, the date of loading, the name of port of loading, the date of ship arrival at the port of loading, the departure date from the port of loading, the arrival date at the port in the country, purchasing prices, and each applicant's quantity of imports, sales and inventory each month.
   (3)The applicants could not use this permission to engage in other concerted actions, nor can they restrict the freedom of any applicant to decide the quantity to purchase, prohibit any applicant from procuring and importing independently, refuse other enterprises to participate in the joint procurement without justification. Any changes occurred to the participants in this concerted action had to be reported to the FTC for reference.
4. Grounds for approval:
   (1) For the applicants, joint procurement and shipment of barley could reduce import costs, diversify risks, make the building of large storage facilities unnecessary, reduce spoilage of stored materials, cut down interest expenses and capital tie-ups, and indirectly bring down processing costs. It could also increase negotiating capacity when trade disputes occur. In addition, suppliers would value the large quantities purchased and provide barley of better quality. As a result, the quality of products from animal feed processing businesses could be assured. Moreover, the purchasing costs thus saved could benefit downstream animal feed businesses and thus prices of animal feeds would drop. In other words, joint procurement and shipment could be helpful for the overall economy and public interest.
   (2)Barley was a commodity subject to no limitation and the government had no restrictions on the qualifications of importers. Any business could freely register the quantity it intended to import and choose the appropriate time to bring it in or purchase from a supplier. There was no difficulty in acquiring this material. Barley in the country was mainly imported from Australia and used in animal feed formulas or in foods after refinement. Substitutability existed between barley, corn for animal feeds and wheat for animal feeds. The barley brought in through joint shipment was a raw material most of which was processed into semi-finished and finished products like barley grain, course cereal and cereal. They were resold to be processed into fine cereal at the midstream or downstream or used for other purposes. According to the statistics on the quantities and value of barley imports from the Customs Administration of the Ministry of Finance, the quantities of barley imported into the country in 2015, 2016 and 2017 (Jan. to Sep.) were respectively 56.688 metric tons, 50,152 metric tons and 44,957 metric tons. Meanwhile, the data and quarterly filed information from the TBPIA indicated that the joint shipment at issue brought in 15,150 metric tons, 11,850 metric tons and 10,002 metric tons respectively in 2015, 2016 and 2017 (Jan. to Sep.), and they accounted for 28.22%, 23.63% and 22.25% of the total barley imports in the same periods. Compared to the 53.87%, 58.71% and 39.40% in 2012, 2013 and 2014, the declining tendency was obvious. Furthermore, as substitutability existed between corn and wheat for animal feeds and semi-finished or finished products produced with barley imported through the joint shipment at issue, the quantities of barley imports through the joint shipment in question in 2015, 2016 and 2017 (Jan. to Sep) would only account for 0.39%, 0.30% and 0.33% of the total imports if the quantities of corn and wheat for animal feeds were taken into account. Compared to the 0.72% , 0.68% and 0.46% in 2012, 2013 and 2014, there was no sign of increasing concentration. Therefore, the influence of the joint shipment of barley imports on the relevant market was limited.
   (3)As described above, the FTC concluded that the extension of the permission for joint procurement and shipment of barley imports could benefit the overall economy and public interest. It complied with Subparagraph 5 of the provision set forth in Paragraph 1 of Article 15 of the Fair trade Law and therefore the application was approved. However, to prevent abusive behaviors within the enterprises filing the application and in their transactions with other businesses as a result of the permission for the concerted action, and with the purpose of facilitating its supervision on the enterprises, the FTC, acting pursuant to Paragraph 1 of Article 16 of the Fair Trade Law, had some undertakings attached to the permission in its approval of the application.